When starting out in business as a sole trader you will be busy with many things such as trying to choose a suitable and catchy business name, working out what your customer base will look like, thinking about how you will charge for your services, how will you advertise and promote your new business? As you can see starting a new business can be both a remarkably busy and exciting time. Another issue that many new business owners will face is setting up processes to manage the finances of the business, whilst this can be a daunting task, here are a few tips to help you get started:
Register with HMRC for self-assessment
You are required to register with HM Revenue & Customs (HMRC) if you receive self-employment income of £1,000 or more in a tax year.
The £1,000 total is before you have deducted any tax-allowable expenses.
A tax year currently runs from 6 April to 5 April.
The deadline for registering for Self-Assessment is 5 October following the end of the tax year - For example:
If you started a business on 19 August 2022, this falls into the 2022-23 tax year, which runs from 6 April 2022 to 5 April 2023.
You must register with HMRC by 5 October 2023.
Your 2022-23 tax return will be due by 31 January 2024.
Top Tip: it is best to register as soon as possible so that you do not forget. You will be charged a penalty if you register late.
We can help you register with HMRC call us on 01772 417220 for more information.
Keep everything
It is important to retain all records of business-related income and expenditure including receipts, copies of purchase invoices, copies of sales invoices, delivery notes, account statements from suppliers, finance agreements, hire purchase agreements. When you come to write up the books of your business or you hire an accountant these records will be required to ensure that your business transactions are recorded accurately. In the event of an inspection from HM Revenue & Customs these records will be required to substantiate any business transactions, so if you are unsure just keep it anyway - keep everything!
Separate bank account
Keep your business transactions and your personal transactions separate, we would always advise you to open a separate bank account which is just used for business transactions, this will mean that you will pay substantially less in accountancy fees as your accountant will only need to analyse the transactions relating to the business rather than having to go through all of your personal transactions, it also keeps your books tidy and clear and avoids any confusion between personal and business.
Accounting software
With the introduction of MTD (Making Tax Digital) we would advise all new business owners to purchase accountancy software and use this to maintain accounting records. There are many diverse types of software available on the market these days from desktop-based software to cloud based software. Your accountant will be able to help you choose the right software for you and your business.
We offer several cloud-based software’s including Sage Cloud Accounting, Xero and QuickBooks & Auto entry and we can help with the initial set-up and provide training call us on 01772 417220 for more information.
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